Breaking News

Tweet TWEET

JAKKS Pacific® Reports Fourth Quarter and Year-End Results for 2013

  JAKKS Pacific® Reports Fourth Quarter and Year-End Results for 2013

Expects Return to Profitability in 2014; Enters Into Commitment Letter with GE
                   Capital for $75 Million Credit Facility

Business Wire

MALIBU, Calif. -- February 26, 2014

JAKKS Pacific, Inc. (NASDAQ: JAKK) reported results for the Company’s fourth
quarter and full year ended December 31, 2013.

Net sales for the fourth quarter of 2013 were $137.7 million, compared to
$133.5 million reported in the comparable period in 2012. The reported net
loss for the fourth quarter was $16.1 million, or $0.73 per diluted share,
which included a restructuring charge of $5.0 million, or $0.23 per share.
This compares to a net loss of $119.5 million, or $5.45 per diluted share,
reported in the comparable period in 2012, which included a one-time non-cash
charge of $91.7 million, or $4.18 per diluted share, related to the impairment
of deferred tax assets.

Net sales for the full year of 2013 were $632.9 million compared to $666.8
million in 2012. The reported net loss for the full year was $53.9 million, or
$2.43 per diluted share, which included charges for license minimum guarantee
shortfalls of $14.4 million and inventory impairment of $14.9 million in
addition to the restructuring charge of $5.0 million. This compares to net
loss for the full year of 2012 of $104.8 million, or $4.37 per diluted share,
which included $91.7 million, or $3.83 per diluted share, for the deferred tax
asset impairment charge.

Stephen Berman, President and CEO, JAKKS Pacific, Inc., stated, “Our sales
results for the fourth quarter of 2013 contributed to our exceeding our
revised sales and earnings guidance for the full year. Highlights of our
fourth quarter sales include Disney Princess dolls and dress-up, including
products from the blockbuster Disney animated feature film, Frozen, Sofia the
First role play toys, Disney Fairies dolls and dress-up, Cabbage Patch Kids,
Black & Decker boys role play, large scale figures, foot-to-floor ride-ons,
and activity tables.”

Mr. Berman continued, “We recently completed our Hong Kong Toy Fair and
Nuremberg Toy Fair meetings to preview our 2014 product line-up and the
response from our North American and International retailers were very
positive. From a product standpoint, we have a broad and robust portfolio this
year comprised of evergreen categories and licenses coupled with hot new
licensed properties. In Boys, we are looking forward to launching our line of
our large-scale figures based on Teenage Mutant Ninja Turtles, Star Wars, and
the upcoming theatrical release of Godzilla and other top boys’ licenses, and
our new Hero Portal TV Games platform. For Girls, we are adding even more
Disney licensed products to our portfolio, including more dolls and dress-up
items based on Frozen. We have added new licenses and distribution channels
for our miWorld™ playsets such as top girls’ brands, Justice® and Skechers®.”

“In 2013, we launched our Little Mermaid and miWorld toys with DreamPlay™ apps
utilizing NantWorks’ recognition technology. Our Little Mermaid Ariel’s
Musical Surprise app received extremely positive reviews from numerous tech
and app sites, both on the quality of the toys and the functionality of the
app. The reviews highlighted the incredible graphics in the app, the DreamPlay
toy technology and the child friendliness of the app. We are expanding our
DreamPlay portfolio for 2014 by doubling our DreamPlay product offerings with
brand new innovations that we believe push the boundaries of technology-based
digital and physical play experiences and will contribute to our profitability
in 2014 and beyond. We are also launching four new toy app initiatives,
including a boys’ battling app tied to a consumer product activation that will
involve key boys play patterns and a standalone app that creates the ultimate
virtual pet.”

Berman concluded, “We are expecting International growth in 2014 through more
product offerings in our current territories and new territories for
distribution. We continue to nurture our long-standing relationships with key
licensors and retailers in 2014 and demonstrate our commitment to product
innovation. We strive to keep a tight rein on operating costs, working capital
and capital expenditures along with other margin improvements. We believe
these strategies and more should position us well for profitability in 2014
and beyond. And lastly, with the traction of our turnaround and product flow
coming out of 2013 and heading into 2014, we were able to obtain a credit
facility commitment, completion of which will provide financial flexibility to
our capital structure.”

Working Capital

As of December 31, 2013, the Company’s working capital was $136.3 million,
including cash and equivalents and marketable securities of $117.3 million,
compared to working capital of $186.6 million including cash and equivalents
and marketable securities of $189.5 million as of December 31, 2012. On-hand
inventory levels decreased to $46.8 million at year-end 2013 from $59.7
million at year-end 2012. In 2013, DSIs decreased 14 days to 52 days and DSOs
decreased 5 days to 66 days.

2014 Guidance

The Company currently anticipates net sales for the full year of 2014 in the
range of approximately $633 million to $640 million, with earnings in the
range of $0.30 to $0.40 per diluted share and EBITDA in the range of $41
million to $43 million. For the first quarter ending March 31, 2014, the
Company expects net sales in the range of $72 million to $75 million with a
loss in the range of $0.77 to $0.81 per share compared to net sales of $78.1
million and a loss of $1.26 per share for the same period in 2013. The
improvement in earnings in 2014 reflects the impact of cost-saving and other
margin improvement initiatives undertaken in 2013.

Credit Facility

The Company today also announced that it entered into a Commitment Letter with
General Electric Capital Corporation (“GECC”) to provide up to $75.0 million
under a seniorsecured credit facility. Closing and funding of the proposed
credit facility is subject to various conditions, including GECC’s completion
of financial, legal and other due diligence, entry into definitive loan
documentation acceptable to JAKKS and GECC, JAKKS meeting such financial tests
and covenants established by GECC, and such other conditions that may be
required by GECC. There is no assurance that such conditions and the closing
and funding will occur.

To the extent funding under the credit facility becomes available, JAKKS
intends to use the net proceeds for working capital, capital expenditures and
general corporate purposes.

Conference Call

JAKKS Pacific will webcast its fourth quarter earnings conference call today,
February 26, 2014, at 9:00 a.m. ET (6:00 a.m. PT). To listen to the live
webcast, go to www.jakks.com/investors, and click on the earnings webcast link
under Events and Presentations at least 10 minutes prior to register, download
and install any necessary audio software. A telephonic playback will be
available from 11:30 a.m. ET on February 26 through March 27, 2014. The
playback can be accessed by calling (888) 843-7419, or (630) 652-3042 for
international callers, pass code “3658 1021”.

About JAKKS Pacific, Inc.

JAKKS Pacific, Inc. (NASDAQ: JAKK) is a leading designer and marketer of toys
and consumer products with a wide range of products that feature popular
brands and children's toy licenses. JAKKS’ diverse portfolio includes Action
Figures, Electronics, Dolls, Dress-Up, Role Play, Halloween Costumes, Kids
Furniture, Vehicles, Plush, Art Activity Kits, Seasonal Products,
Infant/Pre-School, Construction Toys, Ride-On Vehicles, Wagons, Inflatable
Environments and Tents, Impulse Toys and Pet Products sold under various
proprietary brands including JAKKS Pacific®, Road Champs®, Funnoodle®, JAKKS
Pets™, Plug It In & Play TV Games™, miWorld™, Kids Only!®, Tollytots®,
Disguise®, Moose Mountain® and Maui®. JAKKS is also the creator of the
underlying Monsuno® property and toy line. JAKKS is an award-winning licensee
of several hundred nationally and internationally known trademarks including
Nickelodeon®, Warner Bros.®, DC Comics, Saban’s Power Rangers® and Cabbage
Patch Kids®. DreamPlay Toys, LLC is a joint venture between JAKKS Pacific,
Inc. and NantWorks LLC to develop, market and sell toys and related consumer
products incorporating NantWorks’ proprietary iD recognition technology.
www.jakks.com

This press release may contain forward-looking statements (within the meaning
of the Private Securities Litigation Reform Act of 1995) that are based on
current expectations, estimates and projections about JAKKS Pacific's business
based partly on assumptions made by its management. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
statements due to numerous factors, including, but not limited to, those
described above, changes in demand for JAKKS' products, product mix, the
timing of customer orders and deliveries, the impact of competitive products
and pricing, and difficulties with integrating acquired businesses. Continued
payment of the quarterly cash dividend will depend on many factors, including,
but not limited to, JAKKS' earnings, financial condition, business development
needs, and is at the discretion of the Board of Directors. The forward-looking
statements contained herein speak only as of the date on which they are made,
and JAKKS undertakes no obligation to update any of them to reflect events or
circumstances after the date of this release.

© 2014 JAKKS Pacific, Inc. All rights reserved.

JAKKS Pacific, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

                                         December 31,     December 31,
                                             2013                 2012
                                             (In thousands)
                                                                  
ASSETS
                                                                  
Current assets:
Cash and cash equivalents                    $  117,071           $  189,321
Marketable securities                           220                  218
Accounts receivable, net                        101,223              105,455
Inventory, net                                  46,784               59,690
Income taxes receivable                         24,008               24,008
Deferred income taxes                           3,953                7,058
Prepaid expenses and other current             27,673             20,306  
assets
Total current assets                           320,932            406,056 
                                                                  
Property and equipment                          97,325               94,799
Less accumulated depreciation and              86,229             78,973  
amortization
Property and equipment, net                    11,096             15,826  
                                                                  
Goodwill                                        44,876               48,836
Trademarks & other assets, net                  65,922               73,946
Investment in joint venture                     18                   3,161
Investment in DreamPlay                        7,000              7,000   
Total assets                                 $  449,844          $  554,825 
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                  
Current liabilities:
Accounts payable and accrued                 $  94,361            $  101,470
expenses
Reserve for sales returns and                   31,374               34,373
allowances
Income taxes payable                            20,762               12,922
Short term debt, net of current                38,098             70,710  
portion
Total current liabilities                      184,595            219,475 
                                                                  
Long term debt                                  100,000              94,918
Other liabilities                               7,021                18,345
Income taxes payable                            2,597                4,687
Deferred tax liability                         6,946              10,180  
Total liabilities                              301,159            347,605 
                                                                  
Stockholders' equity:
Common stock, $.001 par value                   23                   22
Additional paid-in capital                      200,665              202,577
Retained earnings (Accumulated                  (48,154 )            8,836
deficit)
Accumulated other comprehensive loss           (3,849  )           (4,215  )
Total stockholders' equity                     148,685            207,220 
Total liabilities and stockholders'          $  449,844          $  554,825 
equity
                                                                  
Working Capital                              $  136,337           $  186,581
                                                                             
                                                                             

JAKKS Pacific, Inc. and Subsidiaries
Fourth Quarter Earnings Announcement, 2013
Condensed Statements of Income (Unaudited)

                 Three Months Ended December    Twelve Months Ended December
                   31,                              31,
                   2013          2012             2013          2012
                   (In thousands, except per        (In thousands, except per
                   share data)                      share data)
                                                                    
Net sales          $ 137,730       $ 133,507        $ 632,925       $ 666,762
Less cost of
sales
Cost of goods        81,220          81,652           380,971         374,549
Royalty              15,936          20,172           86,334          82,874
expense
Amortization
of tools and        1,807         917            9,841         11,402   
molds
Cost of sales       98,963        102,741        477,146       468,825  
Gross profit         38,767          30,766           155,779         197,937
Direct selling       14,839          25,555           45,326          64,366
expenses
Selling,
general and          37,275          34,602           143,412         137,313
administrative
expenses
Depreciation
and                 2,705         1,824          11,573        9,480    
amortization
Loss from            (16,052 )       (31,215  )       (44,532 )       (13,222  )
operations
Other income
(expense):
Income from
video game           -               -                -               3,000
joint venture
Change in fair
value of
business             6,000           -                6,000           -
combination
liability
Equity in net
(loss) income        (1,124  )       126              (3,148  )       130
of joint
venture
Interest             26              61               327             671
income
Interest
expense, net        (2,740  )      (3,143   )      (9,942  )      (9,228   )
of benefit
Loss before
provision for        (13,890 )       (34,171  )       (51,295 )       (18,649  )
income taxes
Provision for       2,178         85,286         2,611         86,151   
income taxes
Net loss           $ (16,068 )     $ (119,457 )     $ (53,906 )     $ (104,800 )
Loss per share     $ (0.73   )     $ (5.45    )     $ (2.43   )     $ (4.37    )
Shares used in       22,073          21,923           22,200          23,963
loss per share

Contact:

JAKKS Pacific, Inc.
Joel Bennett, 310-455-6210
or
Anne-Marie Grill, 310-455-6245
 
Press spacebar to pause and continue. Press esc to stop.